The Global Environment Facility's Failure to Promote Sustainable Forestry in Ecuador: The Case of Ecoforest 2000 By Andrew S. Jones

INTRODUCTION

Ecuador is home to the Galapagos Islands as well as coastal and Amazonian tropical rainforests divided by the rugged Andean mountain range. Though small, Ecuador harbors abundant and unique biological diversity. Ecuador also features a large stock of economically valuable natural resources. In their efforts to spur economic growth, recent Ecuadorian governments have relied heavily on natural resource exploitation, often undercutting their own initiatives to protect the environment. For this reason, multilateral institutions and wealthier governments have sought to assist Ecuador (and other similarly situated countries) in efforts to promote a mutually acceptable concept of sustainable development -- a concept that would recognize the need for some exploitation while still conserving important ecosystems and protecting critical species.

A recent proposal by the private sector in Ecuador to develop a sustainable source of timber for the wood products industry as an alternative to clearing rapidly diminishing primary forests garnered the support of the national government and international entities. In June 1992, the International Finance Corporation (IFC) and the Global Environment Facility (GEF or Facility) tentatively approved funding for the proposed ENDESA-BOTROSA Reforestation Project, called “Ecoforest 2000,” in northwestern Ecuador. The project was submitted to the GEF by the Durini Group, the largest logging conglomerate in Ecuador, as a model for carbon sequestration and sustainable forestry in tropical countries. It was slated to receive a $5 million IFC loan supplemented by $2 million in project and research grants from the GEF.

Following two rounds of environmental assessment and substantial criticism of the Durini Group's logging activities in nonproject areas of northwestern Ecuador, the GEF ultimately withdrew from the project in April 1993. This Note traces the history of Ecoforest 2000 -- a history that demonstrates the shortcomings of the Facility's project selection and evaluation processes. Those shortcomings underscore the need for mechanisms to stimulate national-level policy reform in countries that benefit from GEF grants to the private sector or to local or regional groups. The World Bank environmental assessment procedures and the GEF project selection and review procedures failed to elicit a comprehensive and timely consideration of Ecoforest 2000's relationship to both the larger concerns of the regional population and the most pressing threats to the regional environment. In the end, the Facility's decision to withdraw foreclosed the possibility of a potentially invaluable relationship with the regional population, the Durini Group, and the Ecuadorian government. This merely maintained the status quo representing the worst possible outcome.

Part II of this Note describes how Ecuadorian law and policy contributed to the grave loss of biodiversity in northwestern Ecuador in recent decades. Part III explains the international context in which the Ecoforest 2000 proposal was considered, describes the project itself and the process by which it was selected and tentatively approved, and, finally, addresses important deficiencies in that process. The GEF's failure to consider, in a timely manner, internal Bank policies that could have alerted GEF/World Bank staff early on to the pressing environmental problems in the region contributed to the Facility's failure to target government-level reform, and to its ultimate decision to withdraw. Part IV first suggests what the GEF should have done instead of dropping the project and assesses present and proposed GEF initiatives that, in conjunction with actions taken by the Ecuadorian government, might salvage the remaining primary forests in northwestern Ecuador. Drawing on lessons learned from the Ecoforest 2000 experience, Part IV then recommends measures to improve the GEF as an institution devoted to combatting global environmental problems in the developing world.